Daily Archives: September 2, 2011

Limits to Consumerization of IT

At GigaOm, Derrick Harris is wondering about the limits of consumerization of IT for enterprise applications. It’s a subject that warrants consideration.

My take on consumerization of IT is that it makes sense, and probably is an unstoppable force, when it comes to the utilization of mobile hardware such as smartphones and tablets (the latter composed primarily and almost exclusively of iPads these days).

This is a mutually beneficial arrangement. Employees are happier, not to mention more productive and engaged, when using their own computing and communications devices. Employers benefit because they don’t have to buy and support mobile devices for their staff.  Both groups win.

Everybody Wins

Moreover, mobile device management (MDM) and mobile-security suites, together with various approaches to securing applications and data, mean that the security risks of allowing employees to bring their devices to work have been sharply mitigated. In relation to mobile devices, the organizational rewards of IT consumerization — greater employee productivity, engaged and involved employees, lower capital and operating expenditures — outweigh the security risks, which are being addressed by a growing number of management and security vendors who see a market opportunity in making the practice safer.

In other areas, though, the case in favor of IT consumerization is not as clear. In his piece, Harris questions whether VMware will be successful with a Dropbox-like application codenamed Project Octopus. He concludes that those already using Dropbox will be reluctant to swap it for a an enterprise-sanctioned service that provides similar features, functionality, and benefits. He posits that consumers will want to control the applications and services they use, much as they determine which devices they bring to work.

Data and Applications: Different Proposition

However, the circumstances and the situations are different. As noted above, there’s diminishing risk for enterprise IT in allowing employees to bring their devices to work.  Dropbox, and consumer-oriented data-storage services in general, is an entirely different proposition.

Enterprises increasingly have found ways to protect sensitive corporate data residing on and being sent to and from mobile devices, but consumer-oriented products like Dropbox do an end run around secure information-management practices in the enterprises and can leave sensitive corporate information unduly exposed. The enterprise cost-benefit analysis for a third-party service like Dropbox shows risks outweighing potential rewards, and that sets up a dynamic where many corporate IT departments will mandate and insist upon company-wide adoption of enterprise-class alternatives.

Just as I understand why corporate minders acceded to consumerization of IT in relation to mobile devices, I also fully appreciate why corporate IT will draw the line at certain types of consumer-oriented applications and information services.

Consumerization of IT is a real phenomenon, but it has its limits.

Clarity on HP’s PC Business

Hewlett-Packard continues to contemplate how it should divest its Personal Systems Group (PSG), a $40-billion business dedicated overwhelmingly to sales of personal computers.  Although HP hasn’t communicated as effectively as it should have done, current indications are that the company will spin off its PC business as a standalone entity rather than sell it to a third party.

That said, the situation remains fluid. HP might yet choose to sell the business, even though Todd Bradley, PSG chieftain, seems adamant that it should be a separate company that he should lead. HP hasn’t been consistent or predictable lately on mobile hardware or PCs, though, so nothing is carved in stone.

Not a PC Manufacturer

No matter what it decides to do, the media should be clearer on exactly what HP will be spinning off or selling. I’ve seen it misreported repeatedly that HP will be selling or spinning off its “PC manufacturing arm” or its “PC manufacturing business.”

That’s wrong. As knowledgeable observers know, HP doesn’t manufacture PCs. Increasingly, it doesn’t even design them in any meaningful way, which is more than partly why HP finds itself in the current dilemma of deciding whether to spin off or sell a wafer-thin-margin business.

HP’s PSG business brands, markets, and sells PCs. But — and this is important to note — it doesn’t manufacture them. The manufacturing of the PCs is done by original design manufacturers (ODMs), most of which originated in Taiwan but now have operations in China and many others countries. These ODMs increasingly provide a lot more than contract manufacturing. They also provide design services that are increasingly sophisticated.

Brand is the Value

A dirty little secret your favorite PC vendor (Apple excluded) doesn’t want you to know is that it doesn’t really do any PC innovation these days. The PC-creation process today operates more along these lines: brand-name PC vendor goes to Taiwan to visit ODMs, which demonstrate a range of their latest personal-computing prototypes, from which the brand-name vendor chooses some designs and perhaps suggests some modifications. Then the products are put through the manufacturing process and ultimately reach market under the vendor’s brand.

That’s roughly how it works. HP doesn’t manufacture PCs. It does scant PC design and innovation, too. If you think carefully about the value that is delivered in the PC-creation process, HP provides its brand, its marketing, and its sales channels. Its value — and hence its margins — are dependent on the premiums its brand can bestow and the volumes its channel can deliver . Essentially, an HP PC is no different from any other PC designed and manufactured by ODMs that provide PCs for the entire industry.

HP and others allowed ODMs to assume a greater share of PC value creation — far beyond simple manufacturing — because they were trying to cut costs. You might recall that cost cutting was  a prominent feature of the lean-and-mean Mark Hurd regime at HP. As a result, innovation suffered, and not just in PCs.

Inevitable Outcome

In that context, it’s important to note that HP’s divestment of its low-margin PC business, regardless of whether it’s sold outright or spun off as a standalone entity, has been a long time coming.

Considering the history and the decisions that were made, one could even say it was inevitable.